Supreme Court hands down judgment in riot litigation - DAC Beachcroft

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Supreme Court hands down judgment in riot litigation

Published On: 20 April 2016

Mayor’s Office for Policing and Crime ("MOPC") v (1) Mitsui Sumitomo Insurance Co (Europe) Ltd (2) Tokio Marine Europe Insurance Ltd & Others

Overturning the Court of Appeal's unanimous decision, the Supreme Court today ruled that the compensation recoverable under the Riot (Damages) Act 1886 does not include consequential losses.

Insurers and the MOPC have been embroiled in litigation since 2012, after the MOPC refused Mitsui Sumitomo and Tokio Marine's claims for compensation arising out of the total destruction of the Sony DADC Distribution Centre in Enfield during the August 2011 riots.

Unlike the Court of Appeal, who were influenced by the developments in tort law, Lord Hodge's judgment focuses on the legislative history. Referring to medieval applications of the surety principle as evidencing that the community did not always stand in the shoes of the offender, as well as the legislation which developed the notion of a self-contained statutory compensation scheme, the starting point in his view was that compensation was confined to physical damage to property. In the absence of a provision expanding this, and thereby extending the statutory scheme, there could be no recovery for consequential losses under the 1886 Act.

The decision comes just weeks after the Riot Compensation Act 2016 received royal assent (although it has not yet come into force). Repealing the 1886 Act, the new legislation is designed to provide a modern and affordable compensation scheme which upholds the ethos of the historical legislation by continuing to support individuals and businesses affected by riots whilst limiting the burden to the taxpayer. Perhaps unsurprisingly there is a new £1 million cap on recovery and a specific exclusion for consequential loss (although there is a provision allowing for alternative accommodation costs). In a departure from the Kinghan Report recommendations, however, the 2016 Act does not narrow the pool of claimants and so allows businesses of all sizes a right to compensation.

Although Parliament is yet to publish any Regulations dealing with the management and calculation of claims under the Act, it is not difficult to envisage the impact that the new provisions may have on businesses and insurers alike. Chris Wilkes commented that "in an industry where claims for consequential losses commonly exceed those for direct losses, insurers may need to consider whether to amend their policies in the light of the new approach. Any resultant impact on premiums and deductibles could make insurance an increasingly unaffordable source of protection for some businesses. Narrowing the scope of the Act may do unforeseen harm in the long run."

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